Ejin Oasis, located in the lower reaches of the Heihe River Basin (HRB), has experienced severe ecosystem decline between the 1960s and 1990s. In response, the Chinese Government implemented the Ecological Water Diversion Project (EWDP) in 2000. To evaluate the effects of the EWDP, this study monitored changes in land use and vegetation in the Ejin Oasis since 2000 and examined driving factors behind such changes. Results demonstrated that the Ejin Oasis ecosystem generally improved between 2000 and 2011. Water body area significantly increased. Lake area of once dried-up Sogo Nuur increased to 45 km2. Accordingly, vegetation cover restoration has also significantly increased. For example, the Seasonally Integrated Normalized Difference Vegetation Index (SINDVI) has shown that 31.18% of the entire study area experienced an increase in vegetation area. On the other hand, even though the EWDP has been successful in driving vegetation recovery and lake restoration, farmland reclamation has counteracted such restoration initiatives. Farmland area almost doubled between 2000 and 2011. Thus, farmland expansion management is necessary for the full restoration of the Ejin Oasis ecosystems as well as HRB sustainable development. The results of this study can provide a reference for the management of the HRB.